What do I need to Open a SIMPLE IRA?

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What is SIMPLE IRA? The acronym stands for Savings Incentive Match Plan for Employees. This account type offers an intriguing employer-matching alternative to 401(k)s or other qualified plans. Employees can make SIMPLE IRA contributions of up to $13,000 per year if they’re below the age of 50 and up to $16,000 if they’re age 50 or above. These contributions would come directly from the employees’ paychecks. Employers may then either match an employee’s contribution up to 3% of his or her income, or they may contribute 2% to each eligible employee regardless of their employee contribution activities.

Employees and employers may each enjoy tax deductions in the years they make contributions. For a given tax year, the SEP IRA contribution deadline for employees is December 31 of said year, while employers have until their business tax filing deadlines (plus extensions) to match deposits. The SIMPLE IRA holder would only have to pay income taxes upon distribution from the account, which would theoretically occur at retirement age when one’s income tax rate may be lower.

So what would you need to open a SIMPLE IRA with New Direction Trust Company?

Account Application

Our online application can be completed in a matter of minutes.

Form 5304 – SIMPLE

Form 5304 contains IRS disclosures related to opening a SIMPLE IRA. It must be completed and submitted to finalize your new account application.

Fund the Account

In addition to making employee contributions, you may also transfer or roll other retirement funds into a SIMPLE IRA. However, in many cases, such transfers or rollovers may only occur two years after your initial SIMPLE IRA contribution. Pre-tax plans that are subject to the two-year limitation include Traditional IRAs, SEP IRAs, and certain 401(k)s (depending on the companies’ plan documents). SIMPLE IRA-to-SIMPLE IRA transfers can take place at any time.

Make an Investment!

Once your SIMPLE IRA is open and funded, you can take advantage of the same alternative IRA investments that you can with other self-directed retirement plans. At New Direction Trust Company, your IRA can buy real estate, issue secured or unsecured loans, or engage in any alternative investment strategy legally permitted by the IRS.

If you're interested in this investment model, contact your employer to request a SIMPLE IRA salary reduction agreement or any other documentation they may require. For assistance with opening a self-directed IRA or to request a copy of the 5304 SIMPLE document, please feel free to give us a call at 877-742-1270 or send us an e-mail at info@ndtco.com.